Equality Impact Investing at a Crossroads – opening new frontiers, not more of the same, is what’s needed now
By Ceri Goddard and Rana Zincir Celal, EIIP Co Directors
The delivery of the new Dormant Assets Strategy and forthcoming proposals for new investment vehicle provide a key opportunity to accelerate Equality Impact Investing – if it’s grasped.
The Equality Impact Investing Project and its UK Taskforce were created in 2019 to act on a challenge and an opportunity. The challenge, captured in our foundational report Equality Impact Investing: From Principles to Practice, was a clear “inequality blind spot” within the growing social and impact investing (SII) movement and to a lesser, but still significant, degree in the philanthropy sector. The opportunity was, and remains, the largely untapped potential of both SII and philanthropy to impact on both the roots and the results of inequality.
One of the key conditions we identified were needed to meet this challenge and grasp this opportunity is legislation and policy that compels, incentivises and supports equality impact investing (EII). Existing UK equality legislation, already compels government and other public bodies to not only avoid discrimination but also, including under the Public Sector Equality Duty, to proactively consider how they can advance equality and good relations through their work. However, this requirement is a floor not a ceiling; the delivery of the new Dormant Assets Strategy and forthcoming proposals for new investment vehicle provide a key opportunity to accelerate the UK’s EII market as a lever to progress all of government’s five missions – if it’s acted upon.
‘For EIIP, equality impact is about more than making action on economic growth, health, crime, housing, education and tackling climate change more diverse and more inclusive, it’s about fundamentally repurposing and harnessing this work to play a more substantive role in tackling inequality’. Image credit Mike Enerio
By tackling inequality, we mean acting on unfair differences in not just what resources different groups and communities have but also in who they are able to be or what they able to do. These differences stem from systemic factors that perpetuate disadvantage and exclusion, hence the need to move from only addressing the symptoms to also targeting the root causes of inequality. It was not, nor is it now, the case that social and impact investor and philanthropists were or are unaware of such inequality. The blind spot we identified 2019 was rather a lack of awareness of both how relevant this inequality was to their work and the range of positive impact they could have on it if they chose to.
A key premise of EII is that there is no such thing as an “inequality neutral” investor or investment, or philanthropist or grant. Organisations themselves, and their activities, in this context money they invest or distribute, will necessarily have either a positive or a negative impact on inequality. A premise previously firmly established, through evidence, within the wider sustainable development field. In 2019, whilst investors and philanthropists were alive to, and expressing concern about rising inequality, their own work to actively tackle it was limited and also narrow. Limited, as it was largely confined to “niche’’ investors and philanthropists whose funds for tackling inequality and injustice made up a drop in the ocean (4.5%) of the total flowing to the VCSE sector. Narrow, as action in their wider “mainstream” sectors, was largely confined to internal organisational development rather than their external activity impact. More often than not, situated within human resources rather than impact strategies.
Improving organisational diversity and equality and inclusion practice is of course vital, and indeed, is one of five main EII strategies that organisations can pursue. EII Taskforce member, the Diversity Forum is leading the charge on this strategy. But this leaves four EII strategies more focused on external impact which EIIP has been working to increase application of: investing in traditionally marginalised founders, investing in ventures that have good EDI practice, investing in ventures whose activities and services mitigate inequality and investing in ventures whose activities focus is on tackling its root causes. Examples include UnLtd and Comic Relief’s Inclusive Recovery Fund and The Pathway Fund, The Key Fund, The Growth Impact Fund by Big Issue Invest and UnLtd and Social Tech Trust’s “Tech to Unite Us”, and Access Foundation’s Growth Fund, respectively.
We could pen a whole other blog positing why focusing on internal EDI goals still remains the dominant, and often the only, EII strategy being utilised by investors and philanthropists. The drivers and debates are not straightforward, but a fair observation is that whilst diversifying the top echelons of SII and philanthropy, and our wider society, is certainly no easy task, challenging their existence is much harder. However, only diversifying the “haves”, whilst they still retain a disproportionate amount of resources and power, still leaves the collectively damaging “them and us” status quo in place. Strategies and delivery plans that are inclusive, rather than proactively designed to tackle inequity, is certainly better than nothing, but they still accept systemic inequalities as a given to be mitigated, rather something we can actually change.
For EIIP, equality impact is about more than making action on economic growth, health, crime, housing, education and tackling climate change more diverse and more inclusive, it’s about fundamentally repurposing and harnessing this work to play a more substantive role in tackling inequality.
To achieve this, EII comprises the five broad practical strategies above but also a set principles and related standards that help investors ensure their impact is at the very least mitigating inequality and at its very best supporting transformative systemic change. Three of these key principles are shifting power, taking an intersectional approach and prioritising the most disadvantaged. Identifying what these principles mean in practice, and how policy can bring them to life, have been central concerns of our work.
Shifting power means, yes, increasing the agency and participation of communities who funds seek to benefit but also empowering those in a position to make a difference, in this case investors and philanthropists, by building their capacity to tackle inequality. Several of our UK Taskforce (TF) members, such as NLCF, have shifted to much more participative and equity-based approaches and others are taking forward the recommendations from our Equalising Deal Terms project. All of our TF members, and many others, have also co-designed and engaged in foundational EII training and capacity building.
An intersectional approach means, yes, recognising that some groups and communities are subject to multiple forms of discrimination but also that different forms of inequality are inter-related and interdependent. Some TF members, such as BSC have targeted particular groups facing multiple discrimination, whilst others, such as Esmee Fairbairn Foundation, have integrated EI targets across their strategy goals to reflect their inter-relationship. Prioritising the most disadvantaged means ensuring a robust analysis, such as that provided by EHRC, of which groups and communities are consistently or most likely to be left behind. However, it also means recognising there will be always be many more than just one priority and both investor coordination and initiatives that benefit several priority groups are needed for maximum impact. Access’s support for Equally Ours to deliver a pilot Enterprise Development Programme open to a range of equalities organisations is a good example of this latter approach, allowing as it did for different groups to develop the evidence base for more targeted funds that have, and will further follow.
Since 2019, EIIP and the EII TF have made good progress on many of the recommendations in our original report, and we are seeing the green shots of a more balanced approach within the EII ecosystem and market. One which includes work using all the EII strategies and bringing the EII principles to life. However much remains to be done, and if we don’t sustain but also step up our work, progress can be undone.
A review of our work in 2024 found a measurable shift in awareness of the relevance of inequality and the different strategies SII and philanthropy could harness, and evidence of several, but still far too few, investors and funders putting these in practice. The foundations are there but to capitalise on these and accelerate this work, two key things are needed.
Firstly, continued coordination between and capacity building of social and impact investors, in concert and collaboration with philanthropists. Because those on the frontline of tackling inequality within the social economy need both sectors to better recognise and enable their work. EIIP is working to not only maintain but develop our role to support this.
Secondly, greater leadership from government, in particular DCMS, in their work to steward the SII market and increase and engage philanthropy in their missions. Two key opportunities to do that are imminent. One is the implementation plans for the new Dormant Assets Scheme Strategy (DASS), which could set out a clear vision for how these monies could be harnessed to advance equality and provide for the equality impact investing infrastructure that will be needed to realise this vision. The inclusion within the strategy of a £12 million commitment to scale-up funding for the Black and Ethnically Minoritised-led social investment fund, Pathway Fund, is a hugely positive step forward. As is the core principle underpinning the Community Enterprise Growth Plan (CEGP) to support equitable access to finance.
However, the work of EIIP, and its taskforce whose membership includes VCSE infrastructure from across the equality sector, has identified a need and an opportunity to accelerate equality impact investing that yes tackles race inequality but also a range of other inequities impacting different communities of interest e.g., women, people with disabilities, LGBTQI+, refugees and migrants, and place-based disparities. Further, bringing the CEGP’s core principle of equity to life in real world ways will required a concerted programme of capacity building and action. Access’s consultation on the delivery of the DASS is now open and EIIP will contribute further proposals on meeting these needs and grasping these opportunities.
The other is Government’s plans to create a new ‘Social Impact Investment Vehicle’ to mobilise private investment and philanthropy that delivers positive social impact to support the Government to deliver its missions. The Social Impact Investment Advisory Group (SIAG) established by the Chief Secretary to the Treasury in partnership with the Secretary of State for Culture, Media and Sport (DCMS) is supporting policy development of the vehicle. The SIAG is advising Government on ‘how to tackle complex social issues and support delivery of the Government’s missions by blending impact and philanthropic capital and targeting investment to government commitments’, and is reporting in June 2025.
These two key policy developments will be focus of the next EII UK Taskforce in July, at which we hope we will be discussing how we can support their ambitious equality impact goals and provisions proposals. Both the DASS and proposals for a new social investment vehicle will necessarily include published equality impact assessments. The positivity of these assessments will of course depend on the extent that these proposals reflect advancing equality as a key ingredient rather than the icing on the cake.